UNIT – II

Technology Transfer And Joint Ventures

 Concept of Technology Transfer
• Technology transfer is a principle means of
industrialization for underdeveloped nations.
• The transfer of technology from developed
to developing country has grown
considerably in last few decades.
• Acquisition of technology cannot be regarded
as a neutral phenomenon . It is closely bound
by the economic policy at both national &
international level.
 What is Technology Transfer?
The technology transfer process helps a
manufacturing company more effectively use its
human, physical, and capital resources by
providing knowledge, information, or assistance,
which leads to improvements in its facility,
equipment, manufacturing methods,
management methods, or marketing methods.
 Technology Transfer
Invention

Marketing Technology Innovation

(Diffusion) Transfer

Design
 Simple Example
• Incredible that people a million years ago invented the wheel
that would be useful for so long. They saw the need for such
a device that would make certain tasks easier – invention.
• Someone needed to device a way to utilize the wheel –
innovation
• Turn idea into reality and implement other ideas to use the
wheel – design
• Further developments need promotion and device/idea
needs to be disseminated - diffusion
 Inventions
Some are nothing more than scientific curiosity for years before being
transformed into a working device, prototype, or product

Utensils, mast for

100 Years
Aluminum sailboats window
(H. Saite-Claire frames – late 1950’s
Deville, 1854)
90 Years
Total Internal Fiber Optics
1971
Reflection
(William Wheeler, 1881)
43 Years
First I Prototype Gas
Theory of Lasing
discharge laser 1950
(A. Einstein, 1917)
 Inventions
Some inventions have immediate appeal

X-Rays Few Years 1900’s

(1895 – William Rontgen) Used in Medical
Profession
 Inventions
Some Inventions are forced

35 years

Radar Nothing happened

(Patent, 1914) 1940’s
unworkable successful need
WWII

The ‘need’ preceded the product

 The complicated path of Invention
Bundles of
glass Fibers;
Total internal Long uniform quartz
Baird, 1927
reflection, W. fibers; Boys, 1887
Wheeler, 1981
Cladding on fibers
Guiding output of Van Hell, 1952
cathode discharge
lamps; Reeves, 1950 Minimum
attenuation
Laser, 1960’s Theory of attenuation losses
resulting from impurities, achieved
Kao and Hockman 1960 Maurer, 1970

TODAY – Telecommunications, Medicine, dentistry, displays

 A Fundamental Question of
Technology Transfer
• Why do inventions, in some cases, take so
long to reach the market place?
• What factors govern the time lag between
invention and application?

In today’s marketplace, speed to market dictates success or

failure
 Innovation

Invention Product

This period of development is characterized by INNOVATION!

 Relationship – Invention,
Innovation, Design, and Diffusion

Naïve Model - Linear

Diffusion
Innovation
Invention Design

What’s Wrong with this Model?

• Feedback from each stage
• No real beginning and end, invention is often continuous
 Realistic Model

Innovation – Embrace the entire Process

Technology Transfer – Means to achieve
innovation
Innovation

Technology
Invention Design Diffusion
transfer

Embraces the entire process

 Technology Transfer Process

IBM grants a license to the government of Taiwan – the computer corporation

undertakes a transfer of knowledge.
French cheese maker passes on recipes to Japanese firms – transfer of
knowledge
Brown University organizes a short-course – transfer of educational and
technology information

The flow of information and knowledge

are various and wide ranging.
Flow of
information
 Innovation Process Checklist
Technology Transfer is a subject of Innovation

Evaluate Secure
Identify Technology Technology Technology

Prototype Protect
Technology

Technology Awareness
Training
Product
Specific Training
 University – Industry Partnership

Product ideas, real world

perspective, focused
problems, prototyping
facilities, market experience
Inf
or
m ati
on

New results, interesting

devices, research with
seemingly no applications,
professors, and students
 Paths of Technology Transfer Campus-based
Company w

technology No
Government University exclusive Company x
Funding research Invention transfer group
right

Company z

Company x Exclusive
right to
Campus- use it
based
Funding technology
University Option to
transfer group
research Invention exclusive right

option
Company y

no
Company w

Company x
Exclusive right to use
Company z
 Company to Company Transfer
Company x
products
group
Company x Innovation
research idea
Spin-off of
Company X

Company Y
buys
technology

Company SB Innovation Company Z buys

Small Business idea company SB on
right to invention
 The irreducible constraints
• The irreducible set of constraints on the transfer
of technology from R&D to product environment
are:
• Performance
– Efficiency
– Frequency of operations
– Volume & weight
– Bandwidth, power dissipation
• Reliability
– Reliability is the maintenance of
functionality(performance specification) over the life
cycle.
• Cost
– Cost is calculated in terms of functionality
– i.e. cost per unit of performance.
 Application Space
• In the R&D environment we talk of trade off between
cost, performance & reliability.
• In the product environment the specification of cost,
performance & reliability is determined by, and
mapped onto, an application. This mapping process
defines an “application space” having three
independent axes(orthogonal).
• For a given application there is a minimum
performance specification , minimum reliability
specification and maximum allowable cost, this set
constitutes a point inn the application space.
• The total market them is then the collection of all
points in the application space.
• Any trade-off will define at best a new appilation ,at
worst product will not match any existing application.
 The experience Curve
• The experience curve reflects the evolution of
unit cost with cumulative production volume.
• The experience curve, or cost-volume( C-V)
curve, teaches that, unit cost declines with
increase in cumulative volume.
 Return on Investment
• To estimate return on investment we need to
superimpose price on the C-V curve as shown below.
 Return on Investment
• Initial price determined by market force is lower
than cost.
• As producer moves down cost dips below price,
profitability starts rising.
• A price reduction as shown in the figure may be due
to competition or adaption of technology.
• Hashed line is for stable market.
 Necessity for Technology Transfer
• First changing competitive environment
• To have competitive advantage.
• To be in a favorable situation than competitors.
• Strategies in business area are established in consideration
with some fundamental factors and required conditions.
 Technology Outsourcing
• Subjects of technology outsourcing
 Technology Outsourcing
• Management environment factors that
promotes technology outsourcing
 Characteristic of Technology
• Assets that have economic value largely can
be divided into tangible assets which have
specific form . Intangible assets which does
not have any specific form
• Technology to be transferred can be included
in the intangible category.
• In wider sense it means entire intellectual
property which has economic value.
• Planning and executing business strategies
based on understanding of various
characteristics of intellectual property is a
short cut to business success.
 Characteristics of Intellectual
Property.
• Not visible and does not have any physical
form.
• Recovery value is relatively high because of
the limitation in creation and production due
to the high level of intellectual origin.
• Evaluation and valuation is very difficult,and
transfer price and conditions are determined
by negotiations rather than market force.
• Life cycle is relatively short.
 Motive of Technology Transfer
• In case where owner of the patent does not have
the capability to execute and there are no
problem in licensing to third party.
• Problem in developing a basic patent into a
commercial product.
• Disposed for early recovery of R&D cost.
• Difficult to produce the finished good based on
partial patent.
• Sales by specialized technology development
• Individual inventor raises research & invention
funds.
 Payment method of the sales price
for Patents
• Methods where the sales price and the
patents rights registration are exchanged.
• Methods of payment and receipt
simultaneously with the notification of the
completion of transfer.
• 3rd party such as banks.
 Modes of transfer
According to the International Code of Conduct on the
transfer of technology(UN 1980) ,a number of
distinct operationns may be identified, as follows:
• Assigning or granting of industrial rights.
• Handing over technical or non-technical know how
in the form of documents,plans,diagrams and so on.
• The communication of technical or other know
how in the form of supply of services.
• Providing technical services related to the selling or
leasing of machinery
 Modes of transfer
According to Adeboye(1977) who bases his schema on
UNCTAD(1975),wherein the transfer of technology can take
place through one or more of the following means:
• Transfer of published material.
• Purchase of machinery, equipment and other intermediately
goods.
• Transfer of data and personnel.
• Granting and licenses and trademarks.
• Direct foreign investment by transnational co operations.
• Technologists’ mobility
• Technological entrepreneurship
• Interpersonal communication.
 Modes of transfer
Baranson (1975) classifies these mechanisms into
three principle modes
• licensing
• subcontracting
• Supply of equipments and materials..
Goulet adds consultant to the list proposed by
Baranson.
 Modes of transfer
According to M.Sharif(1986) technology transfer is described as
consisting of three elements
• transferor
• transferee
• Linkage
– Direct
• The operations of transnational companies
• Licensing arrangements
• Hiring of experts and contractors
• Training of technical staff abroad.
– Indirect
• Purchase of machinery , equipments, components
• Exchange of information
• Flow of books,journals
• Exhibition and trade fairs.
 Modes of transfer
UNCTC(1987) classifies technology transfer as
• Commercial
– FDI
– Joint venture
– Licensing
– Franchising
– Contracts(marketing , technical service)
• Non-commercial
– Review of technical publications
– Training of foreign students
 Modes of transfer
Two more mode of transfer identified as
• Conventional
• Non-conventional
– Reverse engineering(product imitation)
– Reverse brain drain
– FDI in industrialized countries
– Adopted by NICs
 Transfer from
advanced/industrialized economy
Approach
• Cultural Difference
• Equipment Specification
• Team approach
• Planning
• Program focus and execution
 Product/Processes Transfer
Transfer Procedure
• Discovery of technology
• Technology valuation and demand selection
• Negotiation and contracting
• Packaging
• Marketing
• Post managment
 Product/Processes Transfer
Licensing Methods
• Exclusive license
• Non-exclusive license
• Sublicense
• Cross Licensing
• Package Licensing
 Cost of Technology Transfer
• Direct Cost
• Indirect cost